Overview of Financial Services in India

There are no second thoughts to the fact that the Indian financial services sector has and
will continue to grow leaps and bounds. All credit to the quantum of reforms that have
swept the Indian financial sector. From setting up of independent regulators like that of
Securities Exchange Board of India (SEBI), Insurance Regulatoy Development Authority
(IRDA) etc. to privatization and allowing foreign participation have fuelled the growth of the
financial services industry in India. Currently though the picture is not rosy with global
markets going through a turbulent ride, there's no denying the fundamental fact that India's
financial services industry is not fully developed and is not as inclusive in its reach as
compared to developed markets. This leaves a very fertile ground for the development of
the financial services industry in India in the times to come.
Details of Financial services industry
Broadly, the Indian financial services sector can be segregated into segments, namely
Banking, Insurance, Capital Markets, Private Equity and Mutual Funds. The history of
banking dates back to the 1786 when the General Bank of India' and the first insurance
company The Oriental Life Insurance Company was set up. The stock markets in India
started as early as 1875, when Bombay Stock Exchange (BSE), the oldest stock exchange in
Asia kick-started its operations. With the formation of UTI (Unit Trust of India) in 1963, the
mutual fund industry came into being.
Over the past few years, the financial sector has shown considerable buoyancy. Year 2007
was an eventful year for the Indian stock market with the indices reaching exceptional
highs. The Sensex (Index of the Bombay Stock Exchange) touched the 21000 mark, while
the Nifty (Index of National Stock Exchange) crossed the 6000 mark.
The Primary market also stayed abuzz with activity and during the year the India became
the fifth largest in terms of Initial Public Offerings (IPOs). For the year 2007 08, the
quantum of funds mobilised by India Inc. was pegged at $ 8.13 billion, which was eight
times more than that of the 2006-07.
But of late, after the outbreak of the credit crisis, markets have drastically headed south
with the total market capitalization of BSE and NSE falling by a spine chilling 62.4 percent
and 60.8 percent, respectively, between October 2007-08 (World Federation of Exchanges).
Even the primary markets have seem some dampness with many corporates (Wockhardt
Hosptials, Emaar MGF Land et.al) deferring their plans of tapping capital markets.
The banking industry grew by a Compound Annual Growth Rate (CAGR) of 20 percent March
2002 and 2007. One of the major trends that can be traced is the increase in the share of
private banks in the Indian banking pie. The share of private banks increased to 16 percent
during the year 2006-07 as compared to 9 percent during 2001-02. All this activity has seen
the nine banks and seven micro-finance institutions from India being ranked in the top 50
banks in Asia and Forbes' World's Top 50 Microfinance Institutions, respectively.

Similarly, in case of Private Equity, the flurry of activity made India the top private equity
market in Asia, in terms of deal value. There were a whopping 386 deals signed during the
year 2007 which saw funds worth $ 17.14 billion being mobilised.
With new fund houses and schemes flooding the market like never before the Indian mutual
fund industry has seen considerable growth of late. By March 2008, the total Assets Under
Management by all the fund houses put together grew by a 50 percent (year on year).
Near term trends
It is expected that the India's investable wealth, which was pegged at $ 25 billion in the
year 2007, will burgeon to $ 1 trillion by the year 2012. Even though the stock markets in
India are going through a rough patch, considering the above mentioned figure one could
not help but stay positive about the movements of the Indian stock markets. The Indian
banking sector is on the verge of being opened up in 2009 for the foreign competition,
which will further fuel growth and competition in the industry. According to McKinsey's
Indian Banking 2010' report the revenues of the banking industry will grow to $16.5 billion.
Moreover, India has a gargantuan pool of 135 million households who are still financially
excluded which leaves enough scope for growth. On the other hand, the insurance sector is
waiting the government approval of 49 percent FDI (current limit is 26 percent) which will
see more foreign investments and will expand the industry. According to forecasts, the
Indian mutual fund industry will double its assets to $298 billion by 2012 and will grow at a
CAGR of 18 percent for the next five years.
Careers in Financial services
Considering the fact that the financial services sector as a whole is on a high growth curve,
career opportunities are aplenty. According to reports, there's already a shortage of 90
percent, 60 percent and 75 percent for risk managers, treasury managers and credit
operators, respectively, in the banking and finance sectors. As industry sources put it, the
insuarance sector alone will create 500,000 jobs in the near future.
It's not only about the jobs generated by the domestic financial services sector, but also
there are plenty of opportunities waiting in the outsourcing arena. Outsourcing by the
Banking, financial services and insurance (BFSI) Industry to India is expected to grow at a
rate of 35 percent in the coming years. Nasscom predicts that the Knowledge Process
Outsourcing (KPO) to India is going to grow to $12 billion by the year 2010.
This will open up tremendous opportunities for Chartered Accountants, Commerce
Graduates and MBAs (Finance). Even though the current scenario looks quite gloomy with
global financial services firms shedding their workforce even in India, Indian banks are
stepping up their recruitment plans. The State Bank of India will be hiring a gargantuan
25,000 people this fiscal. Similarly, Bank of India will be adding another 10000 during the
remaining months of this financial year and has plans to add 50,000 and 75,000 people,
respectively, to its workforce in the next two years. Furthermore, Syndicate Bank, IDBI
Bank, Corporation Bank, Allahabad Bank are amongst others which will be making
substantial additions to their workforce in the near future